Playing to rules
Page 7
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ILL THE HARMONISATION of European legislation make many parts of our domestic legislation ineffective?
Our insurance law stems mainly from case law and legislators' reviews. Insurance agreements are the Law of Contract, which is Common Law, and when disputes arise only the courts can adjudicate. So what happens when codified law (definitive legislation) introduces potentially new sets of rules for insurers?
An operators' insurance programme should absorb risks that threaten the business. These are normally easily identifiable. Less easy to comprehend is the need to protect the value of the management and technical skills that drive the business into profit.
Current legislation on "people protection" would fill a tri-axle trailer. I will hopefully clarify the way the insurance market responds to demand as well as looking at a new piece of legislation that no employer can afford to ignore.
The law places a duty of care on the businessman towards the safety of people affected by the actions of the business. Take the following two cases: I. A forklift truck operator jumps off when it strikes a pothole in the yard of the premises occupied by various other tenants of the same landlord. He injures his arm.
2. While sheeting his trailer, a selfemployer driver trips over the ropes he has placed on the ground in a restricted loading area at a customer's premises. He hurts his back.
Mostly, operators rely on their employer and public liability insurances, but often an injured party fails to secure compensation because of the difficulty in proving legal liability beyond reasonable doubt. In both of these examples, defendants could certainly join other parties into the action, with counter claims of contributory negligence likely. The wrangling will be prolonged, possibly causing hardship to the injured.
Employers' liability protects the employer against liability at law to pay damages to an employee who is killed, injured or contracts an illness or disease while working. As well as PAYE employees, many others are regarded as employees including labour masters (and people supplied by them), the self employed, labour only sub-contractors as well as people hired, borrowed or YTS and similar work experience trainees.
Public liability cover is the traditional protection against legal liability for damages awarded to third parties. Most policies should contain extensions for nuisance, trespass, and Health & Safety defence costs. Remember that the term 'third party' includes all persons legally (and sometimes illegally) on an operator's premises — even the VAT man.
Hauliers should not forget products liability cover, particularly if they process the goods under a distribution contract. The recent consumer protection legislation allows injured parties to sue anyone in the chain of supply.
Transport operators can perhaps be regarded as being hard hit given the specific legislation pertinent to their business in addition to the general burden in the shape of Factories, Health & Safety, Consumer Protection, Fire Precautions, Data Protection, Defective Premises and many other Acts of Parliament. Now, however, COSHH legislation places an enormous burden on the businessman. They do not, contrary to popular belief, make it compulsory to issue truncheon vouchers to the workforce. COSHH is the Control of Substances Hazardous to Health Regulations 1988.
Let us consider its impact on operators and the assistance available from the insurance market.
For a hazard to be present, the body must be capable of absorbing the substance by inhalation, ingestion or merely through the skin upon contact. To avoid falling foul of the new rules, every employer is required to complete a risk assessment in the first instance so that a total evaluation of the health risk can be made: another major task for the already overworked transport manager.
Once it has been completed, the information must be conveyed to the work force. However, it is not just a case of identification of harmful substances. The substitution of a harmless substance is an obvious way of elimination, but every transport manager will have to solve the following equation:
• Ability of substituted product to perform required function + cost considerations = employee safety + legal compliance
Risks to health may be reduced by introducing better ventilation equipment. But there still remains a continual duty to maintain, test and inspect equipment. Enforcement is the responsibility of the Health & Safety Inspectorate and councils' environmental health officers. Penalties for breach of the regulations are severe. So what are the insurance implications and what has been the reaction of the insurers? From a liability viewpoint, prosecution following exposure will merely add ammunition to the employee's case, making an adequate or effective defence by the employer's liability insurance difficult. When added to the effect of an improvement or prohibition notice and/or a fine, a large insurance settlement can only add to an operator's burden because of an almost inevitable premium increase.
Insurers have traditionally offered inspection facilities for many items of plant, including systems for the extraction of dust. Now, COSHH has compelled them to review existing methods of inspection and testing. Engineering insurers will no doubt be putting a case forward for more detailed inspection and testing, coupled with more comprehensive advice (did someone mention higher premiums?).
To my mind the expenditure on a package of services from the insurance market is justified when taking into account the hidden costs involved in a transport manager having to allocate many hours in possibly untrained evaluation. One thing is clear: there has been an increase in the demand for personal accident cover for the work force.
The rush to "cover up" by following the personal accident route has ensured some 1inancial comfort, but it is still looked upon by many as a major expenditure difficult to justify. As a rule, driving and warehousing as occupations attract fairly substantial rates. One of the keys to lower premiums is careful management and employee selection, safe working conditions and practices. A group scheme can be a valuable employee benefit, possibly included as part of the payround negotiations.
As an alternative (sometimes additionally) to an employer-financed group cover, brokers can demonstrate a method of providing personal accident cover for the whole work force at no cost to the employer, while employees enjoy very wide cover at vastly reduced rates.
I will summarise the benefits of personal accident cover:
• Staff relations; Asset security; Tax advantages (provided the employees receive policy benefits at the discretion of the employer premiums can usually be treated as tax deductible); Ready cash (payment does not depend on legal niceties); Wide cover (to need to prove legal liability on someone else's part with cover available in many permutations of qualifying employees, geographical limits and so on). In the long term, better insurance deals should be capable of being negotiated as the improvement in the overall claims experience and safety record becomes apparent. • My thanks go to Tony Knight, a broker with 20 years' commercial experience, for his contribution to this article.